Asked by Stephen Sieczkowski on May 09, 2024
Verified
If you thought prices of stock would be rising over the next few months, you might want to ________ on the stock.
A) purchase a call option
B) purchase a put option
C) sell a futures contract
D) place a short-sale order
Call Option
A financial contract that gives the buyer the right, but not the obligation, to buy an asset at a specified price within a predetermined time frame.
Put Option
A financial agreement granting the bearer the option, without being compelled, to offload a predetermined quantity of a fundamental asset at an agreed-upon price during a designated period.
Futures Contract
A contractual arrangement committing to the purchase or sale of a specific financial asset or commodity at an agreed price, set to occur at a future date.
- Grasp the concept of options and futures in financial markets.
Verified Answer
RJ
Ryleigh JonesMay 11, 2024
Final Answer :
A
Explanation :
If you believe that the price of a stock is going to rise over the next few months, the best choice is to purchase a call option on the stock. This gives you the right, but not the obligation, to buy the stock at a predetermined price (strike price) at a future date. As the stock rises in value, so will the value of the call option, allowing you to make a profit.
Learning Objectives
- Grasp the concept of options and futures in financial markets.